REG Study Group Q4 2016 - Page 39

  • Creator
    Topic
  • #836140
    jeff
    Keymaster

    Welcome to the Q4 2016 CPA Exam Study Group for REG.

    If this is your first post in the study group – please post your target exam date (just the time frame to preserve your anonymity), and your past history with this exam (optional, of course).

    Jeff Elliott, CPA (KS) | Another71 | NINJA CPA | NINJA CMA | NINJA CPE

Viewing 15 replies - 571 through 585 (of 2,222 total)
  • Author
    Replies
  • #850389
    sonja90
    Participant

    no it's A. Bad debt would not be part of ordinary income. It is reported as separate line item on 1065.

    #850392
    Anonymous
    Inactive

    @sonja90 that was a good question, bad debt got me

    #850393
    sonja90
    Participant

    Could you define all corporations? for an AEP? cuz from my understanding AEP would be included in S-corps only if C-corp elected to be and S-corp and then it would eventually be exhausted and disappear from S-corps books.

    #850396
    Porma Fierles
    Participant

    Huh I am not getting any email updates on this thread. Anyways, how are you supposed to remember the years to depreciate by for problems like:

    On August 1, 2016, Graham purchased and placed into service an office building costing $264,000, including $30,000 for the land. What was Graham's MACRS deduction for the office building in 2016?

    A.
    $9,600

    B.
    $6,000

    Incorrect C.
    $3,600

    D.
    $2,250

    ANSWER
    Total cost $264,000
    Less: Cost of land – 30,000
    ——–
    Depreciable basis $234,000
    of building ========

    Commercial buildings placed in service after May 12, 1993, are depreciated over 39 years using straight-line depreciation and mid-month convention. While the depreciation is $6,000 per year, since it was placed in service in August, Graham can only take 4.5 months of depreciation in 2016. That is half the month of August (mid-month) and all of September, October, November, and December.

    $234,000 / 39 years = $6,000 per year

    4.5
    $6,000 x —– months = $2,250
    12

    #850398
    Anonymous
    Inactive

    AEP is for C corporations, it is like RE. When C corp becomes an S corp then that ever is left in the balance of the AEP is moved forward to the S corp. Then the S corp will have AAA which is also like a RE. When they S corp distribute dividends it is seen that it first came out of AAA and the AEP. AEP are taxable since they represent income that is not already taxed while AAA is not taxable. Any excess of AAA and AEP is a return of basis and is not taxed.

    #850399
    Anonymous
    Inactive

    In 2016, Joe Buron, a single taxpayer, had $80,000 in taxable income before personal exemptions. Buron had no tax preferences, and his itemized deductions were as follows:

    Real property taxes $4,000
    Home mortgage interest on loan to purchase residence 6,000
    Miscellaneous deductions in excess of 2% of adjusted gross income 2,000

    What amount must Buron report as alternative minimum taxable income before the AMT exemption for 2016?

    A) $84,000
    B) $86,000
    C) $88,000
    D) $92,000

    #850404
    jpowell31
    Participant

    @jon @cpamaster it's B – the basis at beginning of the year was $40k and end of year was $70k, which means only the share of income and NOT distributions would be taken into consideration. if it were a c corp, the basis wouldn't be affected if no distributions were made.

    @porma..that's a good example but it's just somehting you'll have to remember… that MACRS comm buildings use SL 39 years and that they use the mid-month method which means have the month the building was placed into service plus the remaining months of the year…annoyinggggg

    #850407
    sonja90
    Participant

    Under MACRS, real estate acquired after 1986 is depreciated using the straight-line method over the following periods:
    Residential real estate 27.5 years
    Nonresidential real estate placed in service
    before May 13, 1993 31.5 years
    Nonresidential real estate placed in service
    after May 12, 1993 39.0 years

    #850408
    jpowell31
    Participant

    @cpamaster is it B? add back misc deductions and property taxes.

    #850411
    Anonymous
    Inactive

    @jpowell Yup

    #850416
    Porma Fierles
    Participant

    I feel like REG is just an endless line of gotcha questions based on many specific rules that you must memorize. I really wonder how people do this for a living without having to carry a textbook with them everywhere to reference rules and terms. Although admittedly the more I practice 200, 400, 600, I get used to some rules like how casualty loss deducts insurance proceeds, AGI 10% and $100 per loss event.

    #850419
    Anonymous
    Inactive

    Stone Corp. has been an S corporation since inception. In each of year 1, year 2, and year 3, Stone made distributions in excess of each shareholder’s basis. Which of the following statements is correct concerning these three years?

    A) In year 1 and year 2 only, the excess distributions are taxed as capital gain.
    B) In year 1 only, the excess distributions are tax-free.
    C) In year 3 only, the excess distributions are taxed as capital gain.
    D) In all three years, the excess distributions are taxed as capital gain.

    #850422
    Porma Fierles
    Participant

    In BEC there was more why and reason to concepts while here the govt decided oh we will chose 39 months, oh we choose 15% tax rate, oh we choose 2% AGI floor. If I knew why I would remember more, personally speaking.

    #850425
    Porma Fierles
    Participant

    Ummmm, gonna guess D cpamaster

    #850426
    Anonymous
    Inactive

    Yes Correc, he requirement is to determine the correct statement regarding an S corporation's distributions that are in excess of each shareholder's stock basis. Because Stone has been an S corporation since inception, it does not have any earnings and profits and its distributions will not be taxed as dividends. Instead, all of Stone's distributions will be treated as a nontaxable return of stock basis for each shareholder until the shareholder's stock basis is fully recovered. Thereafter, distributions in excess of stock basis will be taxed as capital gain, just as if the shareholder had sold the stock.

Viewing 15 replies - 571 through 585 (of 2,222 total)
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